Wills - Intestacy, Family Provision and Post-death Variations

Question 1

Intestacy

In what three situations do the intestacy rules operate?

Answer 1

1. There is no will.
2. There is an invalid will, or a valid will which fails to dipose of any of the estate (total intestacy)
3. There is a valid will which fails to dispose of all of the property (partial intestacy)

Question 2

Can the rules of intestacy be disapplied?

Can the rules be displaced?

Answer 2

No.
Only in limited circumstances, such as by an order made under the Inheritance (Provision for Family and Dependants) Act 1975.

Question 3

Intestacy - Distribution where there is a surviving spouse and issue

(1) What is the meaning of issue?
(2) Are adopted children included?
(3) Are children of parents who were not married at the time of birth included?
(4) Are stepchildren included?

Answer 3

(1) All direct descendants of deceased.
(2) Yes.
(3) Yes.
(4) No.

Question 4

Intestacy - Distribution where there is a surviving spouse and issue

The distribution is as follows:

Entitlement

Answer 4

a. Spouse/civil partner receives:
- the personal chattels
- a statutory legacy of £270,000
- half of the remaining residuary estate.

b. The other half of the residuary is held for the issue on the statutory trusts.

Question 5

Intestacy: Illegitimate children

If a person dies intestate, and his parents were not married, what is the presumption?

When does this presumption not apply?

Answer 5

That the individual has not been survived by their father or anyone related to the father unless the contrary is shown.

Does not apply where father is named on child’s birth certificate.

This is to avoid PRs needing to enquire about the identity of an unknown father.

Question 6

Intestacy - Distribution where there is a surviving spouse and issue

Personal chattels is tangible moveable property other than property which (3 types)

Answer 6

• consists of money
• was used as business purposes at time of deceased’s death.
• was held solely as an investment at time of deceased’s death.

Question 7

Intestacy - Distribution where there is a surviving spouse and issue

The entitlement of the surviving spouse is subject to the spouse…

Answer 7

…surviving the deceased for 28 days.

If not, the estate is distrubuted as if the spouse has not survived the intestate.

Question 8

Intestacy - Distribution where there is a surviving spouse and issue

If spouses held their family home as beneficial joint tenants, the interest in the property passes to the surviving spouse by survivorship (outside of intestacy rules). If it is held as tenancy in common, or in intestate’s sole name, the intestate’s share passes under intestacy.

(1) Suppose the surviving spouse has an entitlement under the intestacy rules amounting to £500,000, and the residuary estate includes a family home worth £300,000, what can the surviving spouse do?

(2) What if her entitlement is £300,000 and the house is £500,000?

(3) What are the requirements of the surviving spouse to exercise this right? (2 conditions)

Answer 8

(1) The surviving spouse can require the PRs to appropriate the family home in part satisfaction of her entitlement.

(2) The surviving spouse can still require appropriation, provided they pay the difference to the estate.

(3)

• Living in the property
• Formally elects to exercise the right and notify the PRs in writing within 12 months of grant of representation.

Question 9

Intestacy - Distribution where there is a surviving spouse and issue

The issue’s entitlement is applied “on the statutory trusts”, which determines the membership of the class of beneficiaries.

(a) Who are the primary beneficiaries?
(b) What are the interests of the children are contingent upon?
(c) What happens if a child of the intestate predeceases the intestate and leave issue? What is this known as?
(d) What generally happens if a child or issue survives the intestate but dies without attaining a vested interest? (i.e. they have a contingent interest, but die before the age of 18, unmarried). Does the same happen if they leave issue?

Answer 9

(a) The intestate’s children living at the time of death.
(b) Attaining age of 18 or marrying under that age.
(c) The children of the deceased child take the deceased’s share equally between them, contingently upon attaining 18 or marriage under that age. Per stirpes distribution.
(d) Generally, their interest would fail and the estate is distributed as if they never existed. However, if they left issue, that child would substitute their deceased parent’s interest, provided that they were living at the time of the deceased’s death.

Question 10

Intestacy - Introduction

Intestacy imposes a… which provides that the PRs must:

PRs have the power of … allowing them to…

Answer 10

…trust over all the property.
PRs must:

(1) pay funeral, testamentary and administration expenses
(2) debts of the deceased

Power of sale, allowing them to sell assets from the estate to raise cash for debts and expenses.

They also have the power to appropriate assets to satisfaction of a beneficiary’s share, wit the beneficiary’s consent.

Question 11

Intestacy - Distribution where there is a surviving spouse and issue

(1) Spouse means:

(2) A former spouse is excluded, only from the point when:

(3) A couple had a marriage but the wife was underage. Was there a marriage?

(4) A couple had a marriage but one was under duress when entering into marriage. Was there a marriage?

(5) Do cohabitants have entitlement under intestacy?

Answer 11

(1) Person the deceased was married to at the time of death.

(2) Divorce was actually finalised, and marriage legally at an end.

(3) No. Void.

(4) Yes. Voidable until court grants a nullity decree.
(5) No.

Civil partnerships are treated in exactly same way as marriage.

Question 12

Intestacy - Distribution where there is a surviving spouse but no issue

Apart from the spouse, would other relatives have any entitlements?

Answer 12

No.

Question 13

Inheritance (Provision for Family and Dependants) Act 1975

The applicant was a widower who went to live with Mrs Iliffe for the last eight years of her life. Mrs Iliffe gave the applicant rent-free accommodation, cooked and washed for him. The applicant did the garden and household jobs. They pooled their pensions to pay the bills.

Under what ground of the Act did the applicant successfully apply?

Would a temporary break in maintenance have prevented a claim?

When would the claim be prevented?

Answer 13

(e) Person who immediately before death was being maintained by the deceased.

No.

If it were a commercial/contractual agreement.

This provision is designed to catch anyone who did not fall into the categories above, but can establish financial dependency.

Question 14

Inheritance (Provision for Family and Dependants) Act 1975

This Act allows certain categories of people who may be aggrieved because…. to apply to the court for a benefit from the estate.

When else might this Act be used?

Answer 14

…they have been left out of the will or are not inheriting on intestacy.

When a person received some benefit from the will or intestacy but is dissatisfied with the amount.

Question 15

Inheritance (Provision for Family and Dependants) Act 1975

The following persons can make a claim:

Categories of applicant

Answer 15

(a) Spouse
(b) former spouse who has not remarried.
(c) child of deceased
(d) any person treated by the deceased as child of the family.
(e) any person who, immediately before death of deceased, was being maintained by the deceased.
(f) any person who, during the whole of the 2 year period before death was living: (i) in same household as deceased; and (ii) effectively as a spouse.

Question 16

Intestacy - Distribution where there is no surviving spouse and no issue

The residuary estate is divided between the intestate’s relatives as follows: (8 categories)

If anyone falls within the category, how much do others in lower categories receive?

Which three categories do not apply per stirpes?

(or where the spouse dies within 28 days of the intestate)

Answer 16

(a) issue on the “statutory trusts”
(b) parents, equally if both alive.
(c) brothers and sisters of the whole blood on “the statutory trusts”
(d) brothers and sisters of the half blood on “the statutory trusts”
(e) grandparents, equally if more than one.
(f) uncles and aunts of the whole blood on the “statutory trusts”
(g) uncles and aunts of the half blood on the “statutory trusts”
(h) the Crown, Duchy of Lancaster or Duke of Cornwall (bona vacantia)

Parents, grandparents and Crown do not apply per stirpes.

“the statutory trusts” mainly means per stirpes distribution applies.

Question 17

Rose, a widow aged 80, is cared for her by her step-daughter, Katya (the child of her deceased husband’s first marriage). Her only living blood relatives are cousins, the children of her mother’s brothers and sisters. Rose dies intestate.

How is her estate divided?

Answer 17

Her estate is divided per stirpes between her cousins.

Question 18

Inheritance (Provision for Family and Dependants) Act 1975

This provision applies to cohabitants who have not formalised their marriage/civil partnership.

(1) What is the meaning of “same household”?
(2) What is the test for “as husband/wife/civil partner?
(3) What is the test for “Two years immediately before death?

(f) Any person who lived in the same household as deceased effectively as the spouse, during the 2 years prior to death.

Answer 18

(1) living together as one unit.
(2) Whether a reasonable person with normal perceptions would regard them as living together as spouses. The relationship must be openly acknowledged.
(3) Some degree of permanence and commitment.

For (3) temporary separation therefore does not disqualify the cohabitant.

Question 18

The court has discretion to extend the time limit for a family provision application, but only if…

What five factors will the court consider?

Answer 18

…there is good reason for delay.
Court will consider:
- merits of applicant’s claim
- how promptly the applicant sought permission
- whether the estate has already been distributed.
- whether PRs and beneficiaries had notice within the time limit
- whether applicant has an alternative remedy.

Question 19

Inheritance (Provision for Family and Dependants) Act 1975

(b) Former Spouse - When are they prevented from a claim under the Act?
(c) Child of deceased:
- When is a claim likely to fail?
- When might a claim for that same child be more likely to succeed? (3 example situations)

Answer 19

(b) If the divorce court ordered that they cannot claim family provision against the spouse’s estate.

(c) If the deceased’s child is an employed adult with an earning capacity for the foreseeable future.
The adult child has special circumstances such as:
- adult child has disability
- aduilt child worked for deceased for several years, on a low wage;
- Child made sacrifices to care for the deceased.

Question 19

Inheritance (Provision for Family and Dependants) Act 1975

(d) Any person treated by deceased as a child of the family. This provision covers people who…

Answer 19

…are not the deceased’s legal children but acted as a parent. E.g. stepchildren.

Question 19

Inheritance (Provision for Family and Dependants) Act 1975

What is the only ground for a claim under the Act?
What are the two standards for judging this? (explanation next card)

Ground for Claim

Answer 19

“The disposition is not such as to make reasonable financial provision for the applicant”

(i) “The surviving spouse standard”
(ii) “the ordinary standard”

Question 20

Intestacy: Adopted Children

(1) What happens if a person who was adopted dies intestate without spouse or issue?
(2) What happens if a member of the adoptive family dies - does the adopted child inherit?
(3) What happens if a child has a contingent interest in the estate of a natural parent, but is subsequently adopted under the age of 18, unmarried?

Answer 20

• estate distributed between closest relatives of adoptive family.
• Yes.
• The contingent interest is preserved.

On (3) note that this rule only applies to the contingent interest of a child of the deceased, not to other relatives.

Question 20

Inheritance (Provision for Family and Dependants) Act 1975: Time Limit

Applications must be made within…
An application may also be made…
What can a potential applicant do if they are unsure whether a grant has been made?

Answer 20

…six months from the date of the grant of representation.
…before the grant is issued.
Make a “standing search” at the Probate Registry to discover whether a grant was issued in the last 12 months.

A standing search also notifies the applicant of any grant made in the 6 months following the search request.

Question 20

Inheritance (Provision for Family and Dependants) Act 1975

To determine “reasonable financial provision”,
(a) The surviving spouse standard is whether:
(b) The ordinary standard is whether:

Ground for claim: surviving spouse standard

Answer 20

(a) The financial provision is reasonable in all the circumstances.
(b) The financial provision is reasonable in all the circumstances, for the applicant to receive for his maintenance

Maintenance means payments enabling applicant to discharge daily living expenses. It means a non-spouse applicant who is able to pay for their living expenses out of their own resources will not obtain an award.

The surviving spouse standard may be applied to former spouses, but only at court’s discretion.

Question 21

Inheritance (Provision for Family and Dependants) Act 1975

What are the five common guidelines the court will use to determine “reasonable financial provision” for all applicants?

Reasonable Financial Provision: Common Guidelines

Answer 21

(i) financial resources and needs of the applicant and beneficiaries now and in foreseeable future;
(ii) deceased’s obligations toward applicant or beneficiary;
(iii) size and nature of estate;
(iv) disability of any applicant or beneficiary;
(v) anything else which may be relevant such as conduct of applicant.

Obligations include legal and moral.
Easier to make claim against larger estate.

Question 22

Inheritance (Provision for Family and Dependants) Act 1975

(1) Give four specific guidelines in relation to the surviving spouse.

(2) Give one specific guideline in relation to the deceased’s child.

(3) Give three specific guidelines in relation to the cohabitant.

Reasonable Financial Provision: Special Guidelines

Answer 22

(1)

• Applicant’s age.
• Applicant’s contribution to welfare of family.
• Duration of marrriage and
• Likely settlement if marriage would have ended in divorce.

(2) Education/training requirements.

(3)

• Applicant’s age
• Length of cohabitation
• Contribution to welfare of family.

Question 23

Inheritance (Provision for Family and Dependants) Act 1975

The court has wide powers to make orders against the “net estate”, which includes:

If the deceased disposes of property shortly before death, would they reduce the net estate?

Orders

Answer 23

Not only property of the deceased, but also potentially the deceased’s share of joint property passing under survivorship.

No because the court could avoid such gifts.

Question 24

Inheritance (Provision for Family and Dependants) Act 1975

When should the PRs distribute the estate and why?

Protecting the PRs

Answer 24

PRs should distribute the estate six months after the grant of representation being issued because this is the time limit for a Family Provision application.

Then, if the courts do decide to extend the time limit for the Family Provision application, the PRs will not be personally liable, although the applicant may recover from the beneficiaries.

On the other hand, if the PRs distribute within the six months, and the court allows a Family Provision claim, the PRs will be personally liable to the claim if insufficient assets remain in the estate.

Question 25

Post-death variations and disclaimers

Amir’s will gives a legacy of £100,000 to Zainab (who leaves no issue) and residue to Maz. Zainab disclaims her legacy. What happens to the legacy?

The usual limitations on disclaimers are that the beneficiary cannot disclaim part of it and cannot disclaim once they have accepted. Do they apply to Post-death variations?

What are the requirements of a post-death variation?

if the requirements are not met, does the applicant have any recourse?

Answer 25

The legacy passes to Maz.

No.

Requirements: original beneficiary is 18 or oever, with mental capacity.

Yes. Application can be made to court.

Post-death variation: in effect, re-writes the deceased’s will.

Question 26

Post-death variations and disclaimers: iHT Considerations

Amir’s will gives a legacy of £100,000 to Zainab, residue to Max. Zainab disclaims her legacy. She dies 5 years later. What is the IHT consequence (no calculation required).

However, this is not the case where s.142 Inheritance Tax 1984 applies, allowing a variation or disclaimer to be read back as though the testator gave the legacy direct to the new beneficiary. What three conditions need to be satisfied for the “reading back” provision to take place? What additional condition is required of a variation?

Answer 26

The disclaimer is regarded as a PET to Max. Having died within seven years, the gift will be taxed twice: once on Amir death, and once as a PET.

The disclaimer or variation must be:

(i) in writing and signed by original beneficiary.
(ii) made within two years of deceased’s death; and
(iii) not made for consideration

Additional requirement for variation: it must state that s.142 IHTA 1984 is to apply.

(same consequence for a variation)

Question 27

Intestacy - Distribution where there is a surviving spouse but no issue

Apart from the spouse, would other relatives have any entitlements?

Answer 27

No.

Question 27

Post-death variations and disclaimers: CGT Considerations

In his will, a father leaves a painting to his daughter. At the father’s death, the painting is valued at £100,000. One year later, when the painting is worth £130,000, the daughter gives the painting to her son by post-death variation. Can the daughter avoid the CGT consequence of the £30,000 gain?

Answer 27

Yes, provided the conditions above are satisfied that the variation is:
(i) in writing and signed by original beneficiary;
(ii) made within two years of deceased’s death;
(iii) not made for consideration

As it is a variation: it is expressly stated that s.142 IHTA 1984 is to apply.